Global prime warehousing costs increased by 1.7% in H1 2024 to an average of $12.05 per sq ft, although this marked the third consecutive six-month period of decelerating growth, says Savills, with London remaining the most expensive market for prime warehousing property occupier costs (rent, plus taxes and service charges), at $44 per sq ft, an increase of 7.1% between June 2023 and June 2024.
“Whilst a gentle increase in vacancy rates has taken some of the pressure out of the warehousing market, London is a region with constrained land supply, many competing uses and a broad church of occupiers in competition for the best space”, explains Kevin Mofid, Savills Head of EMEA Logistics Research. “A large population and increasing online retail penetration rates continue to drive demand for good quality space.”
On an annual basis, Savills says that prime warehouse costs rose by 5.2% globally between 2023-24, a significant drop from the 9.0% growth observed between 2022-23 driven by a post-pandemic boom, reflecting that in the last 12 months supply has increased and occupier demand has moderated. However, according to Savills, these averages mask significant regional variations: while 74% of markets recorded growth, these were predominantly in Europe and Asia, while some US and Chinese markets saw costs fall as tenant demand weakened and warehouse supply increased.
The international real estate advisor reports that Sydney remains the second most high cost location, while Dubai has climbed to fifth position, with costs increasing by 15% year-on-year as of June 2024, due to a shortage of quality stock and rising demand from non-oil occupiers. Los Angeles and Northern New Jersey, the two US markets in the top 12, each dropped a position with total costs falling by 9.5% and 7.1%, respectively.
In terms of changes in cost, Monterrey in Mexico, while ranked 32nd, saw warehousing costs surge 28.4% in the 12 months to June 2024, as Mexico surpassed China to become the largest exporter to the US, while Ho Chi Minh City in Vietnam (47th overall) similarly benefited from increased demand driven by diversification and the adoption of a ‘China plus one’ strategy by some manufacturers, with warehouse costs rising 16.2% in the same period. Perth in Australia also saw substantial cost growth, of 19.3%, driven by its exceptionally low vacancy rates.
Paul Tostevin, Head of Savills World Research, comments: “Warehousing has recently benefitted from a booming logistics industry and the global diversification of manufacturing, fuelling significant rises in property-associated costs, but we’re now seeing growth slow as higher supply and more moderate demand is helping to rebalance many markets. Big macro trends such as reorientating supply chains and rising ecommerce rates aren’t going away, however, so we expect to see further movement in costs in key locations in the coming years.”